Have equity in your home? Want a lower payment? An appraisal from Appraisal Quest Co. (805) 469-3088 can help you get rid of your PMI.
It's typically known that a 20% down payment is the standard when buying a house. Considering the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value changesin the event a purchaser doesn't pay.
Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they secure the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart homeowners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take many years to get to the point where the principal is only 20% of the original amount of the loan, it's crucial to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends hint at plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisal Quest Co. (805) 469-3088, we're experts at identifying value trends in Camarillo, Ventura County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: